Questions and pitfalls surround $21 million soccer deal

1of13Toyota Field, home of the San Antonio Scorpions, on opening day in April 2013.Photo: Tom Reel /San Antonio Express-News

2of13Gordon Hartman, owner of the San Antonio Scorpions soccer team, sits in his office near a portrait of his daughter Morgan on July 12, 2013. He built the stadium and nearby Morgan’s Wonderland, an amusement park designed for people with special needs.Photo: Bob Owen /San Antonio Express-News

3of13Mayor Ivy Taylor, from right, City Manger Sheryl Sculley and Bexar County Judge Nelson Wolff announce plans on Wednesday, Nov. 4, 2015, involving starting a Major League Soccer team to San Antonio.Photo: BOB OWEN, Staff / San Antonio Express-News

4of13This rendering of a Toyota Field expansion was proposed by Gordon Hartman last year. The cost to expand it was estimated at $38 million to $45 million and the expansion calls for the addition of 10,000 seats to the existing 8,000, with 9,000 of the new seats on an added upper tier.Photo: Courtesy /San Antonio Scorpions

5of13A street view from David Edmonds Drive of a proposed Toyota Field expansion, which was discussed last year by Gordon Hartman. The expansion would be part of a strategy to attract a Major League Soccer team.Photo: Courtesy /San Antonio Scorpions

7of13Edin Husic celebrates his goal in the first half as the Scorpions play the Atlanta Silverbacks at Toyota Field in May 2013. The Scorpians are in a minor league, but the city wants to attract a Major League Soccer team.Photo: Tom Reel /San Antonio Express-News

8of13The San Antonio Scorpions take on the Jacksonville Armada in a NASL soccer match at Toyota Field on Aug. 22, 2015.Photo: Billy Calzada /San Antonio Express-News

9of13The San Antonio Scorpions open in their new stadium, Toyota Field, against Tampa Bay on April 13, 2013.Photo: Tom Reel /San Antonio Express-News

10of13Members of the Crocketeers and the Dragoons supporter groups cheer as they enter Toyota Field at a recent Scorpions game.Photo: Robin Jerstad /For the San Antonio Express-News

11of13San Antonio Scorpions fans cheer during the first half of an North American Soccer League game against the Fort Lauderdale Strikers on June 7, 2014, in San Antonio.Photo: Darren Abate /Darren Abate /M3D14.com

12of13Julius James holds the North American Soccer League Division II Championship trophy as the San Antonio Scorpions celebrate after defeating Fort Lauderdale, 2-1, at Toyota Field on Nov. 15, 2014.Photo: Billy Calzada /San Antonio Express-News

13of13Fans storm the field in celebration after the San Antonio Scorpions won the NASL Championship Final against the Fort Lauderdale Strikers at Toyota Field on Nov. 15, 2014.Photo: Billy Calzada /San Antonio Express-News

Despite enthusiastic support by local officials to buy Toyota Field in an attempt to lure Major League Soccer to San Antonio, potential pitfalls surround the proposed $21 million deal.

Chief among them: Taxpayers would pay most of the cost for the 8,000-seat soccer stadium on the city’s far Northeast Side. But there’s no guarantee of landing an MLS team.

Even in the best-case scenario, the process might take years and voters would be asked to spend millions more to upgrade Toyota Field.

In the worst-case scenario, San Antonio would lose to other cities in the heated competition for an MLS expansion slot, and taxpayers would be left with a stadium that only hosts minor league soccer games.

Toyota Field is already home to a minor league team, the San Antonio Scorpions. So the city and the county would have spent millions on maintaining the status quo at Toyota Field with either the Scorpions or some other minor league team.

“That’s one way to look at it,” acknowledged San Antonio Mayor Ivy Taylor.

“Worst-case scenario, you end up in the minor leagues,” said Bexar County Judge Nelson Wolff. “We obviously don’t prefer that.”

Wolff, Taylor and other local officials emphasize the potential rewards of luring a major league sports franchise to San Antonio would be huge. They’re putting together a compelling deal, they said, with the help of Spurs Sports & Entertainment.

“Certainly, the San Antonio Spurs are one of the most respected ownership groups in global sports,” said MLS spokesman Dan Courtemanche. “They’ve had success on the court, but also have tremendous engagement with the community.”

Beyond MLS, supporters of the deal say the $21 million spent on buying Toyota Field would be going to a good cause.

The owner of the stadium is Sports, Outdoor and Recreation, a nonprofit organization known as SOAR established by Gordon Hartman, a real estate developer and philanthropist.

Hartman built Morgan’s Wonderland, an amusement park named after his daughter that’s dedicated to children with special needs. The $21 million sale would directly support Morgan’s Wonderland, which is located near Toyota Field.

No contracts have been signed and no money has changed hands yet. At public meetings this month, Bexar County commissioners and City Council members approved the broad outlines of a deal to buy Toyota Field and authorized local officials to negotiate the details.

What’s in the fine print will play a big part in whether the city and county are making a wise investment, said Neil deMause, author of “Field of Schemes,” a book about how public funds have enriched the owners of professional sports teams across the country.

More Information

The proposed deal:

Bexar County and the city of San Antonio plan to spend $9 million apiece to buy Toyota Field. Spurs Sports & Entertainment would chip in another $3 million to bring the total purchase price to $21 million.

The city and county would own the stadium and lease it to SS&E for 20 years.

SS&E would pay $1 million immediately to improve Toyota Field, and the city and county would match that by paying $500,000 apiece.

The tax dollars would come from Bexar County’s cash reserves, city hotel tax collections and city fees from the Convention Center and Alamodome.

SS&E would be primarily responsible for pursuing an MLS franchise. The firm would gradually pay back $5 million to the city and the county if it’s unsuccessful in bringing an MLS team to San Antonio.

If SS&E successfully lands an MLS expansion slot, taxpayers would pay all or part of the tab for upgrades at Toyota Field to accommodate an MLS team and boost seating from 8,000 to 18,500.

“The problem is, so many cities and counties get hosed when they invest in sports stadiums,” deMause said. “You can do it if it’s a good deal, but you have to say, ‘What’s in it for us?’”

Details of the deal

As things stand now, Bexar County and the city of San Antonio plan to spend $9 million apiece to buy the two-year-old stadium. SS&E would chip in another $3 million to bring the total purchase price to $21 million.

The city and county would own the stadium and lease it and the nearby STAR soccer complex to SS&E for 20 years. In the short term, SS&E plans to bring a new minor league soccer team to Toyota Field in the Division III United Soccer League, known as the USL.

That’s a notch lower than the Scorpions’ Division II North American Soccer League. But officials hope switching to a team in the USL will improve the odds of drawing MLS to San Antonio. Courtemanche said nearly a dozen MLS clubs own USL clubs.

“We have a great relationship with the USL,” Courtemanche said.

It’s not yet clear what’s going to happen to the Scorpions. But SS&E plans to move quickly with its own soccer team at Toyota Field.

“Our goal is to have a home opener on March 24,” Bobby Perez, senior vice president of SS&E, told county commissioners. “We’re ready to roll.”

SS&E would also pay $1 million immediately to improve Toyota Field, and the city and county would match that by paying $500,000 apiece.

The tax dollars would come from Bexar County’s cash reserves, city hotel tax collections and city fees from the Convention Center and Alamodome.

“I am really pleased with the deal the county and the city have made with Gordon Hartman,” said City Councilman Mike Gallagher, a vocal advocate of bringing MLS soccer to Toyota Field in his council district. “This was a very good buy.”

Under the proposed agreement, SS&E would be primarily responsible for pursuing an MLS franchise. Wolff said SS&E and any of its business partners would pay the MLS franchise fee, which currently costs $100 million. That figure could increase in the future.

If SS&E successfully lands an MLS expansion slot, taxpayers would pay all or part of the tab for upgrades at Toyota Field to accommodate an MLS team and boost seating from 8,000 to 18,500, the magic attendance number for MLS.

The terms of the lease with SS&E haven’t been hashed out. Jeff Coyle, director of government and public affairs for the city, declined to release any draft or proposed agreements.

“If you’re buying a building and then you’re renting it out and making your money back, that’s fine,” deMause said. “If you’re buying a building and a team is playing there and paying much less than it cost you to buy it, then you’re effectively subsidizing the team.”

“How is this going to affect Morgan’s Wonderland?” Gallagher asked Hartman at a Nov. 12 City Council meeting.

“This is going to have a major impact,” Hartman said. “All these funds will be able to go to Morgan’s Wonderland, which is important.”

But at what point does a public investment in a worthy cause become a bailout?

Left unsaid at the Nov. 12 council meeting is that the city has already paid $6.2 million to SOAR since 2007 to buy land for the site of Morgan’s Wonderland and the nearby soccer fields. The city also paid SOAR $1.25 million for construction and utility costs.

But the nonprofit organization has still been operating at a deficit since 2011, according to its publicly available tax records. In 2014, SOAR’s expenses exceeded revenue by more than $2.4 million, records show, and it had nearly $500,000 in cash on hand.

A day after the city and county announced plans to buy the soccer stadium on Nov. 4, Hartman unveiled plans for a new $10 million water park at Morgan’s Wonderland.

Wolff shied away from the term “bailout” and said Hartman had never told him that SOAR desperately needs the money. Wolff and Taylor said taxpayers would be protected by a “claw back” provision if SS&E fail to attract an MLS team to San Antonio within 13 years.

In that case, SS&E would gradually pay back $5 million to the city and the county, effectively bringing the taxpayers’ share of the sales price below the $13.3 million appraised value determined by HVS.

“If somebody was taking this $18 million and putting it in their pocket and running for the hills, I'd say there is a downside,” Wolff said. Instead, the money is helping Morgan’s Wonderland, which he said is a good public investment.

Other officials echoed that view at a Nov. 10 meeting where county commissioners discussed the deal.

“Since this is going to Morgan’s Wonderland, that makes my decision easy,” said Wolff’s son, Kevin, who serves on the Bexar County Commissioner’s Court.

Commissioner Paul Elizondo, responding to a citizen who criticized the deal as corporate welfare, said, “That accusation could be made about anything.” Morgan’s Wonderland serves the entire community, Elizondo said, and the investment by taxpayers might result in a major league soccer team.

“This is a win, win situation,” Elizondo said.

In an interview, Gallagher said Hartman had his own appraisal of Toyota Field that came in much higher than the city’s — more than $30 million. The $21 million purchase price, he said, was an attempt to find middle ground between the competing appraisals.

“The bottom line for me is, I see it as a good investment.” said Gallagher.

Major League Soccer

Whether that $21 million investment pays off with a big-name soccer team is a question that will ultimately be decided by Major League Soccer, led by the team owners and Commissioner Don Garber.

MLS spokesman Dan Courtemanche said the league seeks to bring cities into the fold that meet specific criteria. MLS prefers committed owners with strong financial resources; a comprehensive stadium plan where the owners control the venue; a market that’s in a good location and attractive to corporate sponsors and television advertisers; and a history of staunch fan support for soccer.

Garber announced in 2013 that MLS planned to expand from 20 to 24 teams by the end of the decade. Atlanta, Minnesota and Los Angeles have claimed three of those slots. The fourth expansion slot could go to Miami if retired soccer star David Beckham can work out a deal for a stadium.

Courtemanche said team owners will meet in the coming months and discuss a timetable for adding more teams to the leagues. “Beyond 24 (teams), it has not been determined what the timing and process would be,” he said.

“It’s not a question of if, but when we expand beyond 24,” Courtemanche emphasized. “Right now, it’d be too preliminary to have any insight on that.”

Wolff said he likes San Antonio’s chances.

“There will be competition,” Wolff said. “We do have our shortcomings being low in a media market. But we overcome that with the Spurs.”

Wolff said he was told by MLS officials that they prefer a downtown location for soccer stadiums. Wolff’s pitch to the league is that Toyota Field, located near Thousand Oaks and Interstate 35, could draw fans not only from San Antonio, but also communities along the I-35 corridor such as New Braunfels, San Marcos and Austin.

Courtemanche said the league has found success with stadiums in urban areas. But one of its most popular teams is based in the suburbs of Kansas City.

At other soccer stadiums, teams have primarily relied on a mix of public and private financing. In some cases, taxpayers paid the entire bill, while team owners in other cities covered the entire cost themselves.

Toyota Park, an MLS soccer stadium in Bridgeview, Illinois, cost more than $100 million that was entirely paid by taxpayers.

“Everybody makes the argument in sports that you shouldn't get involved, let them go do the deal themselves,” Wolff said. “But there's very few incidents that the public doesn’t play some role in sports venues. We obviously did that with the Missions (baseball team) and the Spurs.”

Wolff disputed the idea that public spending on a sports stadium is a terrible investment. He cited the county-owned Freeman Coliseum and the AT&T Center on the city’s East Side as success stories.

“Everybody says we didn't get any economic development out there,” Wolff said. “That's (expletive). We got 700 people working for the Spurs. We built 850,000 square feet of exhibit space. Our coliseum is humming and going. And the rodeo is tremendously expanded. We got bang for the buck out there, big time.”

The county’s deal to build a $175 million arena for the San Antonio Spurs has also been criticized. The San Antonio Express-News revealed last month that a highly touted revenue-sharing deal between the county and the Spurs actually resulted in no money for the county.

The bottom line, Wolff said, is that sports are wildly popular and can bind a community together in incredible ways. It’s hard to put a dollar value on that.

“You and I might like it or not. That's what it is,” Wolff said. “They love their sports and it drives a community spirit like nothing else does. The five world championships with the Spurs. You cannot put a number to that. You cannot put a number to how that inspires young people.”

The author of “Field of Schemes” sees it differently, wondering why SS&E needs the city and county to buy Toyota Field.

“Why don’t they buy the stadium or lease it from Hartman?” deMause said of SS&E. “Why on earth does the city have to be the ownership entity? It raises a red flag for me.”

He said the deal is structured in a way that gives SS&E a $5 million escape hatch. Bobby Perez of SS&E did not return phone and email messages last week.

“The upside for the Spurs is, if this doesn’t go anywhere they can just walk away,” deMause said.

John is an investigative reporter with the Express-News projects team, which tackles a variety of in-depth articles. John's investigations have included stories about shady telemarketers at the Texas Highway Patrol Museum, bribery scandals at City Hall and the deaths of oil-and-gas workers on the Eagle Ford Shale. John got the journalism bug 20 years ago writing for Incarnate Word University's student newspaper, the Logos. He still loves working in a field where you never stop learning.